Subject: Fwd: The glaringly obvious guide to the next crash From: Vincenzo lozzo EIIIIIIIIIPWIIIIPIIIIIIIIIM Sent: Monday, September 22, 2014 12:59:35 PM Cc: Joichi Ito , Joshua Cooper Ramo To: "Jeffrey E." <[email protected]> This is somewhat catastrophic but It's a decent read (at least it was for me) Begin forwarded message: > From: "Daniele" > Subject: The glaringly obvious guide to the next crash > Date: 22 settembre 2014 08:25:46 GMT-4 > To: "Claudia, "Vincenzo lozzo > Hindsight is a wonderful thing, especially when it comes to explaining market crashes. Six times in the past 50 years US equities dropped more than 30 per cent in 12 months. After most of them investors looked back at glaring warning signs and were baffled that they missed them. If the S&P 500 were to plunge from 2,000 to 1,400 in the next year, what screaming sell signals would future generations gaze at in the history books and wonder at our ability to ignore the obvious? > * Leveraged loans to private equity are not just flashing red but have a wailing siren and a man walking in front waving a flag. The loans are even bothering the see-no-evil officials at the Federal Reserve, who have been trying to persuade banks that excessively leveraged loans are risky. > More than a third of leveraged loans this year have lent more than six times earnings before interest, tax, depreciation and amortisation, only slightly below the proportion at the peak of the 2007 credit bubble, according to S&P Capital IQ. > Bank exuberance is shown by loans with less lender protection than usual. The proportion of "covenant light", or cov-lite, loans is above 60 per cent, the highest ever. If and when things go wrong, it will be harder for lenders to demand their money back. > * Junk bonds may be known as high yield but offer an extraordinarily low yield. The benchmark Merrill Lynch index yields 6.3 per cent, lower than any time before April - although after a summer wobble it is u